Being an executor is a great responsibility and an opportunity to ensure that the deceased’s wishes are abided by. However, in taking on the role of executor, you may incur some expenses. This article aims to outline some of the costs you are likely to incur as an executor and that the estate can reimburse you for.
Legal fees
Lawyers’ fees are payable out of the estate, provided they are incurred in connection with administration of the estate. What is considered in connection with the estate must be assessed on a case to case basis, but will almost always include fees for:
- Applying for a Grant of Probate;
- Providing advice to the executor about their role;
- Making inquiries as to the value of assets;
- Providing guidance regarding any claims made by debtors or under the Family Provision Act
Other Professional Fees
Legal fees are not the only professional fee payable by the estate. Provided the costs are reasonable, the estate will likely be liable to reimburse an executor for other professional fees, including:
- Real estate agent fees to sell property;
- Accountant fees to prepare an estate tax return;
- Trade fees to bring property to a saleable condition;
- Brokerage to sell shares.
Funeral Expenses
Funeral expenses are either paid directly by the estate or by the executor, who is then reimbursed. Funeral expenses, like any other estate expense, must be kept reasonable and as far as is practical, within the wishes of the deceased. As covered in one of our previous articles (https://www.lynnandbrown.com.au/body-disposal-what-are-the-rights-when-you-die/) a person’s wishes regarding their funeral and body disposal, although mostly not binding on their executor, should generally be followed out of respect for the deceased.
Debts of the deceased
The executors first job upon obtaining a grant of probate is to realise and protect all assets of the deceased and then to ensure that all the deceased’s debts have been paid. Although the executor is not liable to personally pay to clear these debts, they may need to engage professionals to aid them in doing so.
Payment of Bills
Obtaining a grant of probate and attending to other estate administration tasks can sometimes be a time-consuming process, during which bills won’t necessarily stop. If this is the case, executors can opt to pay these bills directly for the time being, with the intention of being reimbursed by the estate later.
What can the executor be personally liable for?
Executors have various duties to the estate and its beneficiaries. If the executor fails to uphold these duties, or carry them out in a timely manner, and costs are incurred or loss occurs as a result, the executor may be personally liable. One example of this may be where the executor has notice of an outstanding estate debt to the ATO and does not pay it within the due date. If interest is accrued on the initial debt, the executor may be liable to pay the interest amount.
Alternatively, if the executor has a duty to invest money being held on trust for a minor beneficiary in an interest-bearing account until they reach a certain age and fails to do so, the executor may be liable to pay the beneficiary the amount of interest that would have been earned had they complied with their duty.
No payment for time and effort
Generally, there is no allowance for the executor’s time and effort. Executors are only paid in limited circumstances:
- Where the Will contains a specific clause authorising payment to the executor (this clause is always contained in Wills where the testator has appointed a professional executor such as a legal practitioner or firm);
- Where the Will provides a conditional gift for a person dependant on them acting as executor;
- Where the beneficiaries of the estate authorise the executor to be paid; or
- The Supreme Court of Western Australia makes an order for an “executor’s commission”
Applying for an executor’s commission can be a costly and time-consuming process that should be reserved only for very complex and high net worth estates. We recommend that for estates of this nature, you engage a legal practitioner to assist with the administration.
Importance of record keeping
It is important to keep records of the expenses you have incurred as executor that you wish to be reimbursed for. Lynn and Brown have experience in dealing with matters where beneficiaries have commenced a court action, arguing that various estate expenses were not reasonable in the circumstances. Records relating to the payment of said expenses aids in dismissing actions of this sort. Records should include, but should not be limited to:
- Invoices
- Bills
- Receipts
- Transaction listings
Conclusion
Serving as an executor entails a significant responsibility, often accompanied by various expenses. Understanding what constitutes a reasonable expense is crucial to both the executor and beneficiaries. Executors can be assured that they will not be left out of pocket for expenses that are genuinely connected to their role and beneficiaries know that the estate is not needlessly diminished during its administration. Ultimately, transparency and adherence to reasonable spending are the keys to ensuring that costs stay within the ambit of reasonability as an executor. If you require advice on your role as executor or assistance with the administration of an estate, please get in touch with our experienced team at Lynn & Brown Lawyers.
About the Authors: This article has been co-authored by Sam Richardson and Steven Brown. Sam undertook his studies at Murdoch University fresh out of high school in 2020 at 17 years old, keen to pursue and interesting and challenging career. Since November of 2022, he has been with Lynn and Brown as a clerk but following the conclusion of his studies, he will be staying with our Wills and Estates team as a Law Graduate. Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.
